Security Deposit Basics

A security deposit (or damage deposit) is money paid to a landlord to ensure that a rented property will be kept in good condition. It can be used by the landlord to pay for any damages caused by a tenant.

The laws regarding the use of security deposits vary from state to state. This article provides a general overview.

Security Deposit or Last Month's Rent

At the beginning of a lease, a landlord may ask for money to cover a security deposit and the first and last month's rent. If the tenant has a pet, the landlord can ask for a pet damage deposit. But the cumulative total of the security deposit can't exceed the legally permitted limit in that jurisdiction.

Not every landlord asks for the last month's rent in advance. They might do so if the tenant's income or credit history, or the unique nature of the rental premises, causes them to suspect they might not get paid.

Most landlords do require a security deposit, usually equal to one month's rent. In some states, the deposit cannot be greater than one month's rent. California, for example, establishes the amount a landlord can request for a security deposit in its Civil Code (California Civil Code sections 1950.5).

New renters sometimes have a mistaken idea that the last month's rent can be taken out of their security deposit, so they don't need to pay it. That is not the case unless the landlord gives specific permission.

Likewise, a landlord typically cannot transfer last month's for the use of the security deposit without the tenant's consent. The landlord can use the security deposit for unpaid rent if the lease has ended and the tenant is delinquent.

If the landlord raises the rent at a later time, they can ask the tenant to pay additional money for the higher security deposit and the increase in the last month's rent.

Documenting Prior Damage

Before or went the tenant moves in, it's in the tenant's best interest to review the property with the landlord. The two of you should agree on its condition. In some states, a signed "statement of condition" is required. This should include a complete list of existing damages identified by the tenant and landlord.

Even if this document is not mandatory in your state, it is a best practice. It protects the tenant from being charged for damages done by a prior tenant that had not been corrected by the landlord. It's wise to photograph existing damage and the general condition of the apartment.

Security Deposits: Receipts and Interest

Upon receiving a last month's rent and/or a security deposit, the landlord should give the tenant a receipt. If he or she does not, the tenant should ask for one. In many states, the landlord is required to give the tenant a receipt.

For best practices, the following information should be included on the receipt:

1. The amount paid
2. The date on which payment was received
3. The intended use of the payment
4. The name of the person receiving it
5. If an agent is involved, the name of the landlord for whom the rent is collected
6. The signature of the landlord or agent

Some jurisdictions require that the landlord give the tenant a statement indicating whether they will be entitled to interest.

At the end of their tenancy, the tenant should inform their landlord where to send a check for return of their deposit, with and interest if applicable.

Returning the Deposit and Deductions

A tenant does not have to pay for reasonable wear and tear associated with the normal use of a property. However, a tenant is responsible for leaving the apartment in clean condition, free of garbage. If a landlord must clean, that cleaning service can be charged back to the tenant.

If the premises are damaged, the landlord typically must provide the tenant with:

1. A detailed list of damages, documenting their nature and extent, and the repairs required to remedy them
2. Estimates, bills, invoices, or receipts, indicating the actual or estimated cost of repairs

The landlord can deduct the amount needed for repairs from the security deposit. Usually, the landlord can also deduct for any unpaid rent that was not validly withheld under the law.

After all proper deductions have been made, the landlord must return the balance of the security deposit (if any) within a fixed timeframe. In some states, this is as little as 14 days after the termination of tenancy; in others, it's as much as 60 days. Consult the law in your state.

IMPORTANT: IN SOME STATES, THE LANDLORD MAY BE REQUIRED TO PAY INTEREST ON BOTH LAST MONTH'S RENT AND SECURITY DEPOSIT

If the landlord:

• Fails to return the remaining security deposit (and any applicable interest) within the specified time, or
• Fails to furnish an itemized list of damages within that time, if deductions were made, then...

The tenant can sue the landlord according to state law. Many states provide for damages triple the amount of the security deposit withheld.

Let a Landlord-Tenant Attorney Help With Your Security Deposit Dispute

Security deposit disputes can be heard in small claims courts, unlawful detainer courts, or conciliation courts. If you're involved in a security deposit dispute, whether as a landlord or as a tenant, a landlord-tenant lawyer in your area can advise you of the law in your case.